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Key markers point to possible turnaround for drilling

Key markers point to possible turnaround for drilling

Increasing crude oil prices and potential signs of growing interest in drilling in the Gulf of Mexico could signal the possibility of a turnaround in the offshore oil bust that has wounded the Houma-Thibodaux economy.

Scott Angelle, director of the federal Bureau of Safety and Environmental Enforcement, said there are several key markers for the oil and gas industry that suggest improvements, including increases in production rates, drilling rig activity and well permit approvals.

“I can say with a level of a confidence that it is turning around,” Angelle said. “I hear from many of the companies that they’re starting to feel much better about the Gulf of Mexico in 2018 than they did in, say, 2016.”

In recent weeks, crude oil has been trading above $70 per barrel, a benchmark that hasn’t been hit since 2014, when prices began to nosedive. Since then, Houma-Thibodaux has lost about 16,000 jobs.

“I’m not in the business of forecasting economic recovery,” Angelle said. “But I am here to say that I’ve been impressed on what I’m hearing ... on some of the things about the oil and gas industry and the Gulf of Mexico.”

Last year, U.S. offshore oil production increased by 6.25 percent over the course of the year, from 592.7 million barrels in 2016 to 629.7 million barrels in 2017. Gulf of Mexico rig activity levels have also been “steadily increasing,” according to a BSEE report, with 46 operating in the Gulf as of mid-May — levels that haven’t been seen in about two years.

Angelle, however, said he was most excited about increased well permit approvals. Fifteen deepwater permits were approved in April, bringing the total for the first four months of the year to 35, almost twice the number approved during the same time period last year.

“That’s a leading indicator that there’s some confidence that’s starting to come back,” Angelle said.

In April 2017, Trump signed an executive order that asked the bureau to reevaluate some regulations in the 2016 well control rule put into place after the Deepwater Horizon explosion, which claimed 11 lives and dumped more than 200 million gallons of oil into the Gulf.

Some Florida politicians and environmentalists have contended that reducing the regulations will make drilling more dangerous.

Revisions to the rule were submitted in late April to the Federal Register, and May 11 marked the beginning of a 60-day period where the public can submit comments.

Out of the 342 provisions that make up the well control rule, the bureau determined less than 18 percent — or 59 provisions — were eligible for revision, Angelle said.

“We didn’t take a chainsaw to the rule,” Angelle said. “We took a scalpel to the rule.”

Although there have been some signs that could indicate the beginning of a renewed interest in the Gulf, oil industry officials were disappointed by U.S. Interior Secretary Ryan Zinke’s decision in April to reject lowering royalty rates for offshore drilling by a third.

While Zinke argued that American energy had been “re-lit” by Trump, the Louisiana Oil and Gas Association pointed to disappointing offshore lease sales as evidence that more needs to be done to attract investors.

However, Angelle said Zinke may consider lowering the royalty rates in the future after further research.

“All these things are combining to create a level of renewed optimism,” Angelle said. “I’m listening to companies saying that they’re getting a little more excited about the Gulf. That means for an area like Houma ... (and) an area like Thibodaux — places that host a lot of this activity — that better days are ahead.”